Trading Psychology: What and Where is Yours?

Posted On 01 Nov 2016

It has been my experience that not everyone appreciates the importance of trading psychology. Unfortunately, it’s not a very sexy form of information and framework of self-discipline. This is due to the fear that it generates in so many traders and/or the belief that he or she doesn’t “need” trading psychology.

Actually, I remember when I first was apprised of the crucial nature of using psychology to the trading process. I had just begun to learn how to trade and pooh-poohed learning about self-discipline as a waste of time (of course you get the dripping irony here of a psychologist that didn’t appreciate the necessity of knowing and using tools to support trade execution). I thought that all I needed was to learn the “right” strategies (the longs & shorts of making a deal work) and then the money would start rolling in. Needless to say that is not the way it works.

In fact, my experience with blowing up accounts fits quite well with anecdotal and statistical data on newly minted traders across the planet. Newbie traders fall into a couple of buckets with regard to their early trading. The first is either they don’t recognize the need to have focus and follow-through strategies to maintain rules and keep commitments; or they know that they need to have strong self-discipline but because they don’t know how to acquire it they continue to flounder and lose money.

But here is the bottom line; it is a requirement to getting consistent successful results that you have a substantive awareness of how you think, a mind-set that appreciates focus, follow-through and keeping commitments, and a set of strategies for changing your internal states from frustration, confusion and fragmentation to being centered grounded and purposeful. So, whether you think that trading psychology is at the top of the what-matters-most list or not, what is painfully clear is that you’ve got to have mental and emotional tools when you’re trading. If you don’t, that’s like driving a car without a steering wheel. You will not only “lose” your way, you will crash and burn without that steering capability brought on by mental and emotional tools.

One of the ways to acquire mental and emotional tools is to become self-aware and in the moment; with an appreciation for that moment being the most important. That is because each moment stands alone in its connection with the present. All past moments are history and no matter how much you may desire to return and get another chance to do the right thing, it is gone forever. All future moments are mysteries and cannot be accessed until they make it to the “Now”.

Also, when you are in the moment you have a much better prospect of being aligned in body, mind and emotions to go in the same direction and for the same goals. If you are not aligned then you will be highly susceptible to internal conflict…one of the main destroyers of being attuned and on alert to what-matters-most. Additionally, when you are self-aware it becomes much easier monitor your thoughts and emotions so as to increase your awareness of what is taking place in your mind-set. You’ll remember that in the above we indicated that one of the most important cogs to becoming a consistently successful trader was fundamental awareness of how you think and how your mind-set is firing. You can’t change what you can’t face and you can’t face what you don’t know. Armed with this data on where your issues stem from you have a fighting chance to begin to address and eventually change them.

Psychology is the study of the mind and its functions, especially those affecting behavior in a given context. How you think determines your emotions and those feelings drive behavior. In other words, what and how you think controls what you do and what you do directly causes the result. Trading psychology is all about your mind and how you are managing what goes on in it in relation to trading. This is what we teach in “Mastering the Mental Game” online and on-location courses. Ask your Online Trading Academy representative for more information. Also, get my book From Pain to Profit: Secrets of the Peak Performance Trader.